ASIC releases report on handling of confidential information

ASIC has released a report containing recommendations about the handling of confidential, market-sensitive information in the context of analyst briefings and unannounced, market-sensitive corporate transactions. The report follows a review by ASIC of market practice and builds on previous guidance provided by ASIC and key industry bodies.

ASIC’s recommendations are largely consistent with that guidance; the report puts listed companies, their advisers and analysts on notice about ASIC’s preparedness to take enforcement action where market-sensitive information is mishandled. It also reinforces the need for greater discipline in analyst/investor briefings and seeks to tighten up practices around market soundings.

Approach to market soundings

ASIC expressed concern at the timing and number of soundings being conducted prior to announcement of corporate transactions, identifying this as a “serious risk area for leaks and insider trading”.

Ensure advisers seek the consent of the listed entity before conducting soundings

Undertake soundings "as early as four days" before an entity's securities are placed into trading halt

Have a process for verbal wall-crossing and follow up emails with pro forma scripts and emails in line with the AFMA guidelines

Undertake soundings during trading rather than after market or during a halt*

Conduct soundings as close as reasonably practicable to the proposed launch of the transaction

Conduct soundings of large numbers of investors

Be prepared for leaks about corporate transactions by having draft requests for trading halts and ASX announcements (ie a “leak strategy”). Consider developing leak and media policies

* In practice, we expect that most (if not all) entities would be reluctant to utilise trading halts whilst market soundings are conducted, at least where the decision to go ahead with the transaction will depend on the outcome of those soundings. In recognition of this, ASIC suggests that if entities are not prepared to use a halt in this situation then soundings should be undertaken after market close the night prior to the proposed launch of the transaction.

Approach to analyst and investor briefings

ASIC has reinforced the importance of knowledge of, and compliance with, relevant good practice guidance on handling confidential, market-sensitive information and the importance of having written policies that are well understood and followed at the organisational level.

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